Choosing a Loan Guide

1. Introduction to Loans

In previous times when we had little choice if we needed to arrange a loan. The first port of call was typically the High Street bank, or local building society. We would then have to rely upon the charity of the bank manager - and of course a sound credit record showing that we were a good risk when it came to repaying money borrowed.

The amounts we could borrow were restricted, and even up to just a decade or so ago, going cap in hand for sums above £10,000 was virtually unheard of. Today however the situation is radically different.

One of the reasons for this massive uplift in debt is the easy availability of money. Whereas we used to be limited to the High Street when wanting to borrow significant sums to buy a car, say, or maybe to help finance other major projects, in 2005 there are endless avenues open to us.

2. How much Should I borrow

It's tempting to borrow whatever you're offered or are eligible to borrow. But it's important to think carefully about how much you really need, and to consider other options., Consider how much you really need, and also consider what other sources of income/money you could use to raise the loan, for example Savings, spending less , maybe selling premium bonds etc..

LOAN TERMS EXPLAINED

Unsecured personal loan
This is a personal loan, available from a bank, building society or other finance company, without security. A lump sum will be loaned in return for agreeing to make regular repayments, usually by bank direct debit. Personal loans of this type are generally offered up to £25,000. Repayments are over a period of time, usually between six months and ten years.

Lenders charge interest, which can be fixed or variable, on the amount borrowed. This interest charge is expressed as an APR (annual percentage rate). The APRs will vary dependent upon the amount of the loan and sometimes the terms. Usually the rate is fixed and remains the same throughout the period of the loan. If it is variable you must be advised of this possibility.

Secured personal loan
A secured personal loan is one in which some of your property, usually your home, is held by the lender as security for the amount you have borrowed. Secured loans usually offer lower interest rates than unsecured ones.

CCJ - County Court Judgement
Someone you owe money to (a 'creditor') can take a County Court action against you to claim the money. If you pay the amount outstanding, you can avoid a hearing or judgment. If not, there'll be a simple court hearing in private. You can attend if you wish, or just send the information the court asks for by post.

The court doesn't find anyone 'guilty' or 'innocent'. It looks at the facts and decides whether you owe any money, and if so, how you should repay it.

Under Scottish law claims are dealt with differently, by the Sheriff Court.